Covid-19 to send almost all G20 countries into a recession

Thu, 26th Mar 2020

This article was updated on 22 May to reflect the latest forecast data.

Following the coronavirus outbreak, we have revised our growth forecasts for all countries across the world. The results paint a bleak picture. Across the G20, all but two countries will register a recession this year. The global economy will contract by -4.2%.

Revised growth forecasts for G20 countries in 2020

Real GDP growth (% in 2020)

Real GDP growth (% in 2020)

Previous forecast (before outbreak)

Argentina

-9

-2

Australia

-4.2

2

Brazil

-5.5

2.4

Canada

-4.3

1.8

China

1

5.9

France

-8.8

1

Germany

-6.1

0.9

India (2020/21 fiscal year)

-4

6

Indonesia

1

5.1

Italy

-10.8

0.4

Japan

-5.2

0.4

South Korea

-2.1

2.2

Mexico

-9

1.1

Russia

-5.2

1.6

Saudi Arabia

-3.2

1

South Africa

-5.6

1.4

Turkey

-5.4

3.8

UK

-8.7

1.1

US

-4

1.7

Global (market exchange rates)

-4.2

2.3

“The global economic picture is looking bleak, with recessions in almost every economy across the world. China is the only major economy that will record growth; this reflects the fact that China remains ahead of the pandemic curve. We assume that there will be a recovery in the second half of the year, but downside risks to this baseline scenario are extremely high, as the emergence of second, or third waves of the epidemic would sink growth further. The years 2020 and 2021 will be lost for growth, and global GDP will not recover to their pre-coronavirus levels before at least 2022.”

Agathe Demarais, The EIU’s Global Forecasting Director

Regional highlights

The US economy will contract by 4% this year. The administration’s initial response to the coronavirus was poor, allowing the illness to spread quickly. In addition, just as the economic risks related to Covid-19 began to mount, the agreement between Saudi Arabia and Russia to cut oil production collapsed, sending oil prices tumbling. The combination of the coronavirus epidemic and the slump in global oil prices means that both consumption and investment will contract sharply this year. This puts Donald Trump’s re-election bid at risk, as unemployment will reach record-high levels.

The impact on China’s economy of the Covid-19 outbreak is set to be much deeper than that of SARS. Assuming that the virus does not flare up again, we expect China’s real GDP growth to stand at only 1% in 2020, compared with an estimated 6.1% in 2019. The slowdown will have been concentrated in the first quarter of this year. Growth will recover in the second half of the year when China typically produces most of its GDP. However, the disruption in global supply chains will weigh on China’s recovery throughout the year.

The euro zone will be one of the hardest hit regions, posting a full-year recession of 8%. Germany (-6.1%), France (-8.8%), and Italy (-10.8%) will register full-year recessions. The depth of the crisis will expose tensions and political divides within the currency bloc. Monetary and fiscal policy levers are being used to the full across the bloc. The European Central Bank (ECB) is playing an important role in maintaining market sentiment, keeping access to financing open even for the more indebted members of the euro zone, and dampening the risk of a debt crisis.

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